By Coleman H.B. No. 1601
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the registration and reporting by charitable
1-3 organizations.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS;
1-5 SECTION 1. Title 9, Property Code, is amended by adding
1-6 Chapter 124 to read as follows:
1-7 CHAPTER 124. REGISTRATION AND REPORTING BY
1-8 CHARITABLE ORGANIZATIONS.
1-9 Sec. 124.001. SCOPE OF ACT; SHORT TITLE. (a) Except as
1-10 provided by this chapter, this chapter applies to all charitable
1-11 organizations doing business in Texas. In addition to other acts
1-12 that may constitute doing business in Texas, the solicitation of
1-13 contributions from persons in Texas shall be considered to be doing
1-14 business in Texas, regardless of where the solicitation originates.
1-15 (b) This chapter may be cited as the Charities Registration
1-16 and Reporting Act.
1-17 (c) This chapter does not apply to organizations subject to
1-18 Article 9023b or Article 9023c, Revised Statutes.
1-19 Sec. 124.002. CONSTRUCTION AND APPLICATION. (a) This
1-20 chapter shall be applied to promote its underlying purposes, which
1-21 are to encourage contributions to legitimate charitable
1-22 organizations through public awareness and donor education, and to
1-23 prevent persons from posing as charitable organizations and from
2-1 using misleading fundraising practices, because such activities are
2-2 harmful to legitimate charitable organizations and to the citizens
2-3 of this state.
2-4 (b) This chapter may not be construed to unreasonably burden
2-5 legitimate charitable organizations.
2-6 Sec. 124.003. DEFINITIONS. In this chapter and for purposes
2-7 of this chapter only:
2-8 (a) "Charitable organization" means
2-9 (1) a person who is exempt or has applied for
2-10 exemption from federal income tax under Section 501(c)(3) of the
2-11 Internal Revenue Code of 1986; or
2-12 (2) a person who solicits contributions and is exempt
2-13 or has applied for exemption from federal income tax under Sections
2-14 501(c)(4) or 501(c)(10) of the Internal Revenue Code of 1986; or
2-15 (3) any other person who solicits contributions and is
2-16 or holds himself, herself or itself out to be established or
2-17 operating for a charitable purpose, except for commercial
2-18 conventurers and volunteers that have been authorized to solicit on
2-19 behalf of a charitable organization which has registered in
2-20 accordance with the provisions of this Act.
2-21 (b) "Charitable purpose" means (1) any purpose described in
2-22 Section 501(c)(3) of the Internal Revenue Code of 1986; or (2) the
2-23 provision of assistance to needy individuals.
2-24 (c) "Commercial Solicitor" means any person who is retained
2-25 by a charitable organization to solicit contributions, whether such
3-1 solicitation is done individually or through other persons under
3-2 the direction of the commercial solicitor. No fundraising counsel
3-3 shall be deemed to be a commercial solicitor. No bona fide
3-4 employee, officer, director or volunteer of a charitable
3-5 organization shall be deemed to be a commercial solicitor. No
3-6 person who advises another person to make a charitable contribution
3-7 shall be deemed, as the result of such advice, to be a commercial
3-8 solicitor.
3-9 (d) "Contribution" means the promise to give or gift of
3-10 money, credit, property, financial assistance, or other thing of
3-11 any kind or value, except for volunteer services. It does not
3-12 include bona fide fees, dues or assessments paid by members,
3-13 provided that membership is not conferred solely as consideration
3-14 for making a contribution in response to a solicitation.
3-15 (e) "Person" means an individual, partnership, corporation,
3-16 association, or other entity, however organized.
3-17 (f) "Solicit" and "solicitation" mean:
3-18 (1) The direct or indirect request for a contribution
3-19 on the plea or representation that the contribution, or any portion
3-20 thereof, will be used for a charitable purpose or to benefit a
3-21 charitable organization. A solicitation shall be deemed to have
3-22 taken place whether or not the person making the solicitation
3-23 receives any contribution. Without limiting the scope of the
3-24 foregoing, these works shall include the following method of
3-25 requesting contributions:
4-1 (A) any oral or written request;
4-2 (B) publicizing a request in newspapers, on the
4-3 radio or television, or by any telecommunications device or other
4-4 manner of transmitting information to the public;
4-5 (C) the distribution, circulation, posting or
4-6 publishing of any handbill, written advertisement or other
4-7 publications;
4-8 (D) offering for sale any advertisement, book,
4-9 card, coupon, ticket, membership, merchandise, subscription,
4-10 flower, candy or other tangible item if any appeal is made for any
4-11 charitable organization or charitable purpose, or if the name of
4-12 any charitable organization is used or referred to in the appeal as
4-13 an inducement or reason for making the sale, or where any statement
4-14 is made that the whole or any part of the proceeds from the sale
4-15 will be used for any charitable purpose or to benefit any
4-16 charitable organization; or
4-17 (E) the use or employment of canisters, cards,
4-18 receptacles or similar devices for the collection of money or other
4-19 things of value in connection with which any appeal is made for any
4-20 charitable organization or charitable purpose.
4-21 (2) The words "solicit" and "solicitation" shall not
4-22 include a request for contributions by a charitable organization
4-23 made solely to its current and former trustees, officers,
4-24 directors, members, employees, students, advisory boards, or
4-25 volunteers.
5-1 (g) "Knowingly" means with actual awareness, but actual
5-2 awareness may be inferred where objective manifestations indicate
5-3 that a person acted with actual awareness.
5-4 (h) "Commercial coventurer" means any person who for profit
5-5 regularly and primarily is engaged in trade or commerce other than
5-6 in connection with soliciting for charitable organizations or
5-7 charitable purposes and who conducts a charitable sales promotion.
5-8 (i) "Charitable sales promotion" means any advertising or
5-9 sale conducted by a person who represents that the purchase or use
5-10 of goods or services offered by the person will benefit, in whole
5-11 or in part, any charitable organization or charitable purpose. The
5-12 provision of advertising services to a charitable organization,
5-13 either for compensation or as a donation, does not of itself
5-14 constitute a charitable sales promotion.
5-15 (j) "Fundraising counsel" means any person who for
5-16 compensation consults with a charitable organization or who plans,
5-17 manages, advises or assists with respect to the solicitation of
5-18 contributions for or on behalf of a charitable organization, but
5-19 who does not have custody and control over contributions or other
5-20 receipts from a solicitation or authority to pay expenses
5-21 associated with a solicitation and who does not solicit or employ,
5-22 procure or engage any compensated person to solicit contributions.
5-23 A bona fide officer, volunteer, or employee of a charitable
5-24 organization shall not be deemed a fundraising counsel.
5-25 Sec. 124.004. EXEMPTIONS. (a) Subject to the exception in
6-1 subsection (b), the following persons shall not be required to
6-2 register under Section 124.005:
6-3 (1) Charitable organizations that are exempt from
6-4 federal income tax under Section 501(c)(3) of the Internal Revenue
6-5 Code of 1986 and exempt from filing annual information returns with
6-6 the Internal Revenue Service under Section 6033 of the Internal
6-7 Revenue Code of 1986 and the Treasury Regulations issued pursuant
6-8 to Section 6033;
6-9 (2) institutions of higher education which have
6-10 current accreditation from a regional accrediting association;
6-11 (3) nonprofit hospitals which are required by law to
6-12 file financial reports at least annually with a state; and
6-13 (4) private foundations, as defined by Section 509(a)
6-14 of the Internal Revenue Code of 1986.
6-15 (b) A person described in subsection (a) shall register, by
6-16 filing a registration statement and filing fee in accordance with
6-17 Sec. 124.006, in any year in which it engages the services of a
6-18 commercial solicitor, at least 10 working days prior to the
6-19 effective date of the contract with the commercial solicitor.
6-20 Sec. 124.005. REGISTER TO BE MAINTAINED. (a) The attorney
6-21 general shall establish and maintain a register of charitable
6-22 organizations subject to this chapter.
6-23 (b) Except as otherwise provided herein, all documents
6-24 required to be filed with the attorney general under this chapter
6-25 shall be public information and shall be available to the public
7-1 pursuant to the Open Records Act, Chapter 552, Government Code,
7-2 except those documents which identify the donors of a charitable
7-3 organization, which information is confidential and shall not be
7-4 subject to disclosure.
7-5 Sec. 124.006. REGISTRATION. (a) The attorney general shall
7-6 maintain a registry of charitable organizations that submit to the
7-7 attorney general completed registration statements that contain the
7-8 following information:
7-9 (1) The legal name, assumed name(s), mailing address,
7-10 street address, telephone numbers and facsimile number(s) of all
7-11 offices, chapters, local units, branches and/or affiliates of the
7-12 charitable organization;
7-13 (2) the employer identification number of the
7-14 charitable organization;
7-15 (3) the name, title, addresses and telephone numbers
7-16 of the charitable organization's officers, directors and executive
7-17 director or other chief operating officer;
7-18 (4) the name of any officer, director or employee who
7-19 has been convicted of or pleaded nolo contendere to a misdemeanor
7-20 involving fraud or the theft, misappropriation, misapplication, or
7-21 misuse of property of another, or of any felony, the offense, and
7-22 the state, court and date of each conviction or plea of nolo
7-23 contendere;
7-24 (5) the date the charitable organization was
7-25 incorporated, the state of incorporation, or, if not incorporated,
8-1 type of organization and date established; the day and month on
8-2 which the organization's fiscal year ends; and whether the
8-3 organization is eligible to receive tax-deductible contributions
8-4 under Section 170 of the Internal Revenue Code of 1986;
8-5 (6) whether the organization has applied for or been
8-6 granted IRS tax exempt status, and if so, the date of the
8-7 application, the date the exemption was granted or denied, the
8-8 Internal Revenue Code section under which the application was
8-9 based, and a statement as to whether and when the tax exemption has
8-10 ever been denied, revoked or modified;
8-11 (7) the date the organization began doing business in
8-12 Texas and the name and address of the organization's registered
8-13 agent in the state of Texas;
8-14 (8) a statement of the charitable organization's
8-15 charitable purposes and, if the organization solicits
8-16 contributions, a list of the programs for which funds are
8-17 solicited;
8-18 (9) a list of all foundations, combined campaigns,
8-19 governmental entities, and persons who are exempt from federal
8-20 income taxation under Sections 501(c)(3), 501(c)(4) or 501(c)(10)
8-21 of the Internal Revenue Code of 1986, from which the charitable
8-22 organization received funds in the previous 12 months;
8-23 (10) for charitable organizations that solicit
8-24 contributions from any persons other than prior donors or persons
8-25 who have used the services of the charitable organization or the
9-1 direct beneficiaries or families of direct beneficiaries of the
9-2 charitable organization, a statement including the following
9-3 information:
9-4 (A) whether the charitable organization or any
9-5 of its directors, officers, agents, or employees has been enjoined
9-6 by a government agency or court from soliciting, has had its
9-7 registration denied or revoked, has been the subject of any court
9-8 or administrative proceeding regarding any solicitation or
9-9 registration, and/or has entered into a voluntary agreement of
9-10 compliance;
9-11 (B) a list of all states where the charitable
9-12 organization is registered or has been registered including dates
9-13 of registration, registration numbers, any other names under which
9-14 the charitable organization was or is registered and the dates and
9-15 types of solicitation conducted in each state;
9-16 (C) the names and addresses of each individual
9-17 in the charitable organization responsible for custody and control
9-18 of funds, distribution of funds, fund raising, custody of records
9-19 or authorized to sign checks and/or make withdrawals. This
9-20 information is confidential and shall not be subject to disclosure
9-21 pursuant to the Open Records Act, Chapter 552, Government Code;
9-22 (D) the names, addresses and telephone numbers
9-23 of the organization's accountants and auditors and the method of
9-24 accounting used;
9-25 (E) a statement that the charitable organization
10-1 has attempted in good faith to comply with and to the best of the
10-2 knowledge of all its officers and directors, is in compliance with
10-3 all applicable Texas county and municipal ordinances regarding
10-4 solicitation or, if none apply, a statement to that effect;
10-5 (F) for charitable organizations that engage the
10-6 services of commercial solicitors, the name and address of all
10-7 commercial solicitors so engaged in the previous twelve months, as
10-8 well as written confirmation from the commercial solicitor that it
10-9 has complied with any state and/or local registration laws;
10-10 (G) the amount paid to commercial solicitors
10-11 during the previous twelve months;
10-12 (H) the total contributions received in the
10-13 previous twelve months; and
10-14 (I) the total fund raising costs in the previous
10-15 twelve months, calculated pursuant to generally accepted accounting
10-16 principles;
10-17 (11) a copy of the charitable organization's most
10-18 recently filed IRS Form 990 and other federal tax returns,
10-19 including all supplements, amendments and attachments to these
10-20 returns and requests for extensions to file such returns, or, if
10-21 the charitable organization does not file federal tax returns, (1)
10-22 a statement as to the reason none is filed; and (2) the charitable
10-23 organization's most recent financial statements, including audited
10-24 financial statements, if any have been prepared; and
10-25 (12) a sworn statement verifying that the information
11-1 contained in the registration statement is true, correct and
11-2 complete to the best of the affiant's knowledge.
11-3 (b) All charitable organizations doing business in Texas on
11-4 the effective date of this Act shall file initial registration
11-5 statements by January 1, 1996. All charitable organizations that
11-6 begin doing business in Texas after the effective date of this Act
11-7 shall file initial registration statements at least 10 working days
11-8 before doing business in Texas.
11-9 (c) Registration expires on the 15th day of the fifth month
11-10 following the close of a charitable organization's fiscal year.
11-11 Renewal registration statements shall be filed on the same forms
11-12 required for initial registration statements and shall include the
11-13 name and employer identification number of the charitable
11-14 organization and any changes to the information previously
11-15 submitted to the attorney general. For items on which there is no
11-16 change from the previous year's registration statement, "no change"
11-17 may be indicated.
11-18 (d) A $75 filing fee shall accompany the initial
11-19 registration statement; a $75 filing fee shall accompany all
11-20 renewal registration statements.
11-21 (e) The registration statements shall be submitted on forms
11-22 prescribed or approved by the attorney general.
11-23 Sec. 124.007. NOTIFICATION OF NONCOMPLIANCE. (a)
11-24 Charitable organizations that are not in compliance with the
11-25 provisions of this chapter shall be notified of noncompliance by
12-1 the attorney general by first class mail at the organization's last
12-2 reported address. Noncompliance shall include failure to file any
12-3 documents required by this chapter or the filing of incomplete or
12-4 inaccurate documents.
12-5 (b) A charitable organization shall be deemed to be in
12-6 violation of this chapter if it fails to file complete documents
12-7 within 30 days of the date the notice required by Section
12-8 124.006(a) has been mailed, or if it knowingly files materially
12-9 inaccurate documents.
12-10 Sec. 124.008. RECORD KEEPING; AUDIT POWERS OF THE ATTORNEY
12-11 GENERAL. (a) Every charitable organization required to file
12-12 registration statements shall keep true books and records as to its
12-13 activities within the state in such form as to enable it to
12-14 accurately provide the information required by this chapter. Such
12-15 books and records shall be retained for a period of at least three
12-16 years after the end of the period to which the registration
12-17 statement relates. All books and records of a charitable
12-18 organization shall be made available for inspection and copying by
12-19 authorized personnel of the attorney general upon written request
12-20 by authorized personnel of the attorney general.
12-21 (b) A charitable organization shall make available the
12-22 information requested by authorized personnel of the attorney
12-23 general at the organization's principal place of business within
12-24 ten working days of the date of the request, or at such time and
12-25 place as may be agreed.
13-1 (c) The authority established in this section is in addition
13-2 to other statutory or common law audit or investigative authority
13-3 of the attorney general.
13-4 Sec. 124.009. USE OF FEES. All fees collected by the
13-5 attorney general under this chapter are appropriated to the
13-6 attorney general during the biennium of receipt to administer the
13-7 provisions of this chapter, to enforce this chapter, and to educate
13-8 the public about this chapter and charitable organizations and
13-9 solicitations generally.
13-10 Sec. 124.010. TOLL-FREE TELEPHONE LINE. The attorney
13-11 general shall establish and operate a toll-free telephone line.
13-12 The public may telephone the toll-free number to:
13-13 (a) obtain information concerning a charitable organization
13-14 that has registered pursuant to this chapter; or
13-15 (b) report an alleged violation of this chapter.
13-16 Sec. 124.011. REGISTRATION DOES NOT IMPLY ENDORSEMENT.
13-17 Registration pursuant to this chapter does not imply endorsement by
13-18 the state or the attorney general, and charitable organizations are
13-19 prohibited from stating or implying to the contrary.
13-20 Sec. 124.012. REMEDIES. (a) The attorney general may
13-21 institute an action for failure to fully and accurately comply with
13-22 any provision of this statute, and may obtain injunctive relief to
13-23 restrain the person from continuing the violation or violations,
13-24 cancellation or suspension of the registration, an order
13-25 restraining the person from doing business in this state while
14-1 violating this chapter, and/or civil penalties of not more than
14-2 $25,000 per violation. A person who violates an injunction issued
14-3 under this chapter is liable to the state for a civil penalty of
14-4 not less than $100,000.
14-5 (b) The remedies authorized by this chapter are not
14-6 exclusive, but are in addition to any other procedure or remedies
14-7 provided for by any other statutory or common law.
14-8 (c) In any proceeding successfully prosecuted by the
14-9 attorney general under this chapter, the court may allow the
14-10 attorney general to recover civil penalties and the reasonable
14-11 costs, expenses, and attorney's fees incurred in bringing the suit.
14-12 Sec. 124.013. APPROPRIATION OF FEES AND CIVIL PENALTIES. In
14-13 addition to moneys appropriated elsewhere, the attorney general is
14-14 hereby appropriated all fees assessed pursuant to and all recovered
14-15 expenses incurred in obtaining injunctive relief, administrative
14-16 and/or civil penalties authorized by Chapter 124, Property Code.
14-17 Recovered expenses include, but are not limited to, investigative
14-18 costs, witness fees, attorneys' fees, and deposition expenses.
14-19 Moneys hereby appropriated may be expended only for purposes of
14-20 enforcing and administering the provisions of Chapter 124, Property
14-21 Code and may not be appropriated for any other purpose.
14-22 Sec. 124.014. SERVICE ON SECRETARY OF STATE. (a) The
14-23 secretary of state is an agent for service of process or complaint
14-24 on a charitable organization which:
14-25 (1) is required by the state to designate or maintain
15-1 a resident agent but has not designated or maintained a resident
15-2 agent for service of process;
15-3 (2) has one or more resident agents for service of
15-4 process, but two unsuccessful attempts have been made on different
15-5 business days to serve each agent; or
15-6 (3) is not required to designate an agent for service
15-7 in this state.
15-8 (b) Service on the secretary of state may be made by
15-9 certified mail, return receipt requested, by the clerk of the court
15-10 in which the case is pending, by the party or representative of the
15-11 party or by any other method authorized by statute or the Texas
15-12 Rules of Civil Procedure for service on the secretary of state.
15-13 (c) If the secretary of state is served with process for a
15-14 charitable organization, he shall require a statement of the name
15-15 and last known address of the charitable organization and shall
15-16 immediately mail a copy of the process to the charitable
15-17 organization by registered mail or by certified mail, return
15-18 receipt requested.
15-19 Sec. 124.015. VENUE. In any proceeding under this chapter,
15-20 venue shall be in a court of competent jurisdiction in Travis
15-21 County, in the county in which the charitable organization has its
15-22 principal place of business, or has a fixed and established place
15-23 of business at the time the suit is brought, or in the county in
15-24 which solicitation occurred.
15-25 Sec. 124.016. RULES. The attorney general may prescribe any
16-1 rules, procedures and forms which are consistent with and necessary
16-2 for the proper administration and enforcement of this chapter.
16-3 SECTION 2. The changes in law made by this Act apply only to
16-4 a solicitation that takes place on or after the effective date of
16-5 this Act. A solicitation that takes place before the effective
16-6 date of this Act is governed by the law in effect on the date of
16-7 the solicitation, and the former law is continued for this purpose.
16-8 SECTION 3. This Act takes effect September 1, 1995.
16-9 SECTION 4. SEVERABILITY. If any section, sentence, clause,
16-10 or part of this Act shall, for any reason, be held invalid, such
16-11 invalidity shall not affect the remaining portions of the Act and
16-12 it is hereby declared to be the intention of this legislature to
16-13 have passed each section, sentence, clause, or part irrespective of
16-14 the fact that any other section, sentence, clause, or part may be
16-15 declared invalid.
16-16 SECTION 5. EMERGENCY. The importance of this legislation
16-17 and the crowded condition of the calendars in both houses create an
16-18 emergency and an imperative public necessity that the
16-19 constitutional rule requiring bills to be read on three separate
16-20 days in each house be suspended.